Trust is not enough: Chapel Hill’s housing dilemma – Ted Vaden

When you stroll the shops and restaurants of the stylish East 54 “new urban” village in Chapel Hill, you can’t help but be impressed by the terraces and handsome facades of the condos rising above.

Marketed as luxury units, they offer 10-foot ceilings, hardwood floors and granite countertops. The development abuts Finley Golf Course and is only a mile from the UNC campus.

What’s not so apparent is that scattered among the $500,000 condos are 34 residences that are officially classified as affordable housing. Sold by the Community Home Trust, the condos have been purchased by low- to moderate-income buyers at prices ranging from $70,000 to $110,000.

The units are the product of inclusionary-housing policies in Orange County fostered by the Home Trust and the local towns. Under a 2010 ordinance, Chapel Hill requires developers to set aside 15 percent of their new homes as affordable homes.

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By many measures, the program has been a success. Since the first purchase was completed in the year 2000, 252 homes in Orange County have come under the Home Trust’s portfolio of affordable housing. You can find – but hardly recognize – low-cost homes in such impressive residential projects as Meadowmont (48 affordable homes), Vineyard Square (30 homes), Larkspur (13 houses) and Greenbridge condominiums (15 units).

“It’s been a miracle for me,” said Nancy Fantozzi, as she recently toured her two-bedroom Greenbridge condo, boasting views of downtown Chapel Hill from every room. “It’s completely changed my life. It’s allowed me to stay in the community I raised my children in.”

The great appeal of the program is that it spreads lower-income housing throughout the community, instead of being concentrated in low-income neighborhoods. “With inclusionary housing, our homes are spread out,” said Robert Dowling, the longtime executive director of the Land Trust. “We can blend into the community, and they’re not stigmatized.”

Dowling recently led a tour of Meadowmont and other developments. Newer residents of Meadowmont, he said, are not even aware that their neighbors live in subsidized housing. “People moving into Meadowmont today have no idea that they’re affordable. They’d be shocked.”

The Home Trust operates under guidelines that restrict who qualifies to buy the units. The homes are available to people with incomes less than 80 percent of the federally defined Area Median Income. For a two-person household, that would be $46,950.

The Home Trust works with prospective buyers to qualify them for bank loans, generally using a rule of thumb that the buyer not pay more than 30 percent of income on mortgage and other housing-related expenses.

The program works in part because of the unique land trust arrangement that, literally, underlies the homes. While the buyer owns the unit she lives in, the land trust retains ownership of the land on which it’s built. That enables the nonprofit to limit market escalation, but still gives the buyer the opportunity to realize a limited gain on the unit when it’s sold. The Home Trust handles all sales and sets the sale price to keep the homes permanently affordable.

“They can’t lose money, but they may not make much,” Dowling said.

The program rests upon the towns’ inclusionary-zoning policy designed to encourage developers to set aside parts of projects for affordable housing. Before 2010, in Chapel Hill, the policy was a negotiated process that developers agreed to as a condition of getting their projects approved. In that year, as the recession winded down, the town made the policy a matter of law rather than negotiation. Developers must either set aside 15 percent of homes for affordable housing or donate a “payment in lieu” to the town to support housing programs.

Ironically, the ordinance has not worked out in practice. Of the five new home projects approved since 2010, only one met the requirement and did so by making the “in lieu” payment rather than building lower cost homes.

A lot of us campaigned on a platform of affordable housing, yet that’s not reflected in the votes of everyone.

Nancy Oates, Town Council member

For the other projects, the council allowed developers to use a looser standard for affordability that has the effect of raising the price of the houses sold through the Home Trust. (The ordinance specifies that homes be sold at prices that can be afforded by people earning 65 percent to 80 percent of Area Median Income (AMI). The council bent the rules to allow higher prices affordable to people earning up to 100 percent of AMI.)

“A lot of us campaigned on a platform of affordable housing, yet that’s not reflected in the votes of everyone,” said Town Council member Nancy Oates, who voted against a project because it relaxed the inclusionary-housing requirement. “Developers come in and say, ‘We can’t make the numbers work,’ and the council takes them at their word.”

Everyone I talked to had praise for the Home Trust program and its record of seeding affordability into new developments. But they also said that record – 252 affordable units in 17 years – is a drop in the bucket in terms of the need in the community.

“I think they’re doing a great job as far as it goes,” said council member Michael Parker. “But we’re creating demand for affordable housing faster than we’re creating inventory.”

He called for new tools to encourage affordability, especially in rental housing. Towns don’t have the same leverage to force developers to include affordable apartments because of state law restrictions on rent controls.

Ultimately, said Parker, it will come down to what the community is willing to invest to support affordability.

“If we want affordable housing, we have to put money into it,” he said. “We have to recognize that it requires all of us, not just developers, to provide methods of subsidization.”

Ted Vaden, retired editor of The Chapel Hill News, can be reached at tedvaden@gmail.com